Investment advice: The company's performance exceeded expectations, with strong orders and sales. Considering the company's smooth downstream expansion, continuous improvement in the order structure, and positive raw material costs and exchange rates, I am optimistic that the company's 2024 performance will increase. The company's 2024-2026 EPS forecast was raised to 1.21/1.40/1.67 yuan (originally 1.14/1.35/1.60 yuan), maintaining the target price of 20.98 yuan and increasing its holdings.
The results exceeded expectations. The company released its 2024 semi-annual performance forecast. It is expected that 2024H1 will achieve net profit of about 0.437-0.572 billion yuan, a year-on-year increase of about 30.0% to 70.0%. The company's expected performance center is 0.505 billion yuan/+50% year over year; the company's estimated net profit for the 2024 single quarter is 0.241-0.375 billion yuan, an increase of about 1.0% to 57.5% year on year. According to the announcement, 2024H1 is expected to achieve net profit of about 0.43-0.565 billion yuan after deduction, an increase of about 22% to 61% over the previous year. The high increase in the company's performance is mainly due to: 1) strong orders and sales for 2024H1; 2) the company actively explores the market, optimizes product structure and design, improves product quality, improves production and operation efficiency, and saves management costs; 3) high-margin offshore shipbuilding, oil and gas development, LNG and other businesses and the increase in the share of orders. The company's Q2 net interest rate is expected to increase.
The company's order structure continues to improve, and the gross margin level is expected to increase in 2024. Currently, the company has sufficient orders in hand, and is preparing to receive new orders in 2025. On the production capacity side, there is a surplus of newly expanded production capacity, and there is still room for revenue improvement. Looking downstream, the company's various downstream orders are more balanced. Continued improvement in the order structure is the driving force behind the company's high profit growth. The company has added new volumes in shipbuilding (LNG), offshore (FPSO), water treatment (overseas), air separation, etc., and order demand continues in the fields of petrochemicals, oil and gas extraction, nuclear power, etc. The gross margin benefits from the low price of upstream raw materials, the exchange rate, and the increase in the company's high value ratio. The gross margin for the whole year is expected to reach 33%.
Downstream has maintained a high boom, and we are optimistic that orders will continue. 1) Traditional downstream helps the valve industry grow, global power generation is rising steadily, and global energy demand is bringing high demand for industrial valves; 2) LNG and hydrogen energy: the Russian-Ukrainian conflict has triggered an increase in demand for energy such as LNG in Europe; the Middle East energy transition accelerates hydrogen energy construction to release more demand for valves; 3) Offshore: Domestic orders for LNG ships and FPSO ships have increased, and industry localization substitution is expected to accelerate, and I am optimistic about the gradual release of orders; 4) Nuclear power:
In the future, it is expected that the number of nuclear power units will reach 6-8 units every year, and the value of valves required for single units is about 0.5 billion. High-tech barriers ensure high product value; 5) Ethylene: Domestic ethylene projects are under construction and development, and orders are expected to be gradually fulfilled.
Risk warning: Reduced downstream capital expenditure due to falling oil prices, ethylene project construction falls short of expectations, etc.